A simple guide to setting up a UK limited company

Thinking of a starting a company? Here Tom O' Donnell, office manager of virtual office provider RegisteredAddress.co.uk walks us through what you need to know to register a new business in the UK.

The main reasons people form companies are:

To have a legal business entity separate from their person

To limit liability

To look more professional

To share ownership of a business

For tax reasons

Companies House charges less than £20 to set up a company and the same when you file your annual return. If you have a minimal understanding of business terms you can set up a company yourself at the Companies House website.

To get a better understanding of what’s included go to beta.companieshouse.gov.uk, type in any limited company name you know, then click on the resulting links. Interesting, isn’t it? You can see the company personnel, the mailing addresses and the historical filings of the company.

Your details will be online as well, so consider whether you want to use your home address or office, or buy a registered office address from a private company.

1) Choosing a name

It’s important to understand the difference between Companies House and the Intellectual Property Office.

A Companies House registration does not protect the name ‘Pelican Trousers’ being used by anyone else in the same niche or in your local area. The only thing it stops is someone else setting up a company with that exact name in England.

If you want to develop and protect a trademark called “Pelican Trousers”, then you need to register that name with the Intellectual Property Office.

It helps to spend a little time thinking about the moniker you’re going to see day after day (at least until you run out of money!).

You’ll have to tell people this name

You’ll have to dictate the spelling over the phone

You'd like clients to be able to remember it easily

It should appropriate to your niche

You may hope to be able to sell this company in the future

You may hope to attract investors in the future

Names like 'Best Management Company Ltd' are as memorable as a wet Sunday afternoon in Luton.

2) Registering a limited company

Ok, let’s assume that you know you need a limited company and that you’ve got a name which isn’t being used by anyone else: what’s the next step to register a company in the UK?

Well, you need to have certain details to hand. These are:

Company name

Registered office address

Directors (who they are and what their home and correspondence address is to be)

SIC code (a number which defines roughly what niche the company will operate in, you can look them up in the government guidance here)

Shareholdings (who gets shares, how many and at what value)

PSC (persons with significant control, usually the majority shareholder)

Memorandum and Articles of Association (you can use templates)

The Articles of Association are the company’s statement of the rules of its’ operation; how it will operate. 99.999% of companies do not need to make up their own Articles. It’s expensive. It should only be done if your company has some non-standard composition, or purpose, and after taking legal advice.

It’s also possible to implement a Shareholder Agreement, which can help resolve disputes between directors and shareholders by anticipating what could go wrong and setting out what will happen in these scenarios (read more here).

Before you submit, here are some basic Dos and Don’ts:

Dos:

Keep it simple

Take your time

Be meticulous

Get someone else to do it if you're not sure, like a formation agent

Don’ts:

Don’t try to be smart and use words like Bank, Society or Royal in the company name

Don’t try to register a version of an existing or popular name

Don’t have a large shareholding like £1,000,000

Don’t have your friends or family members as shareholder or directors, unless it’s absolutely essential

We can’t stress the need to be accurate! We’ve seen cases where the data of birth of a director is wrong, share capital has been set at a £1m and the founders haven’t realised that has to be accounted for and event someone not spelling the company name correctly.

3. New company documentation

Here are the documents you get if you form a limited company in the UK:

Articles Of Association

Certificate Of Incorporation

Memorandum Of Incorporation

Share Certificates

The formation agent will typically email these to you, along with your Companies House Authentication Code. He may also post you printed copies. The latter can be useful when you go to your bank to set up a business bank account.

None of these has a financial value like a birth certificate or a passport ie. they are not momentous historical documents of great value. They are automatically generated at the time of incorporation and, in the internet era, they can be replaced by anyone with a graphics program and the relevant information to hand.

So, don't freak out if you mislay them.

4. Conclusion

One finds that some clients are overly anxious about their obligations as directors and others extraordinarily relaxed. The ideal is somewhere in the middle.

Her Majesty's Government is a bit like the headmaster of a school; it will only take a personal interest in you if you are doing very well indeed or if you are doing very badly. People forget that the government is the employee of the people and not the other way around. Bureaucrats are disinclined to make more work for themselves.

Your tiddler of a company, which is now nearing its first filing date, is not significant to them. HMRC has millions of entities to process and thus, thousands of queries to deal with. You are 454 in a queue of 723. And that's just today.

So, as long as you give the beast what it wants, don't get too smart and you pay your dues, you're golden!

One of our suppliers is a British owned firm based in The Canary Islands. They just started what is called a ZEC company, which exempts them from all kinds of company taxation and means they only pay 4% Corp. tax.
I kind of think they have the right idea...